Will Newspaper Paywalls Kill Web Advertising?

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About one-fourth of all newspapers now have paywalls on their websites, with more to come. But 95% of all "local news" sites probably won't go that route. (Think TV sites, Patch, Examiner.com.) Is it a good idea, or will newspapers get eaten alive on the web? This presentation points to a bigger issue: Newspapers are getting beaten in the race to deliver content that holds the greatest value of all online: Advertising content.

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<ul><li> 1. Will Paywalls KillNewspaper Web Advertising?March 1, 2013 Special Presentation for Press Forward Conference</li></ul> <p> 2. About this presentationThe following presentation was made by GordonBorrell during Press Forward, the WisconsinNewspaper Association/Associated PressConvention &amp; Trade Show, at the Madison MarriottWest in Middletown on March 1, 2013. 2012 Borrell Associates Inc. 3. The Paywall Phenomenon 4. Its Definitely a Trend 2013 Borrell Associates Inc. Sources: Borrell Associates Inc.; Pew Research 5. A Few Facts to Consider 2013 Borrell Associates Inc. Visitors, visits/visitor &amp; reach stagnant for newspapers But not for TV &amp; hyperlocal pureplay sites 95% of local news websites dont have paywalls These companies dont: 6. A Few Facts to Consider 72% of daily newspapers do not have a paywall 2013 Borrell Associates Inc. When paywalls go up, web traffic declines 20-40% . . . but typically returns in 12-14 months Story limits range from 5-25 per month; avg. is 11 Pricing: $2.87/mo. subscribers; $9.96/mo. non-subs. Jackpot! Newspaper stocks up! McClatchy +40%, NYT +45%, Gannett +33% 7. 2013 Borrell Associates Inc.Source: CommonWealth Magazine 8. Newspaper Online Ad Sales 9. Newspapers Share of Local Online Adv. Local Online Advertising, 2012: 2013 Borrell Associates Inc.$18.5 Billion Source: Borrell Associates Inc., Adspending.com 10. But Newsp. Share of Online Steadily Declining 2013 Borrell Associates Inc.24%Share 57% Share Source: Borrell Associates Inc. 11. Advertisers Dont Seek News ReadersWhen it comes to the lean-forward medium of online, themass-media news model doesnt work very well.Numbers tell the story. Companies with only advertising content(not local news) dominate the local online marketplace.Thats because local advertisers seek buyers in the onlinearena, not readers. 12. Top 25 2013 Borrell Associates Inc. Primarily Ad Content Primarily News &amp; Info Content 13. Illustration: Banners Arent SeenTraditional media websites rely heavily on banner advertising.But the display model only works with lean-back media likenewspapers, TV or radio, where people are more receptive to ads.An eye-tracking chart tells the story. Leaning forward, websitenews readers see everything BUT the ads. 14. Eye tracking: Everything but Ads 2013 Borrell Associates Inc. 15. The Best Online Content? Advertising!Online mimics yellow pages directories the other lean-forwardmedium. And the directories content is . . . you guessed it, nothingbut advertising.Illustrated in the following charts, while TV and radio attract a lotof consumer attention, the minuscule amount of time spent witha yellow pages book attracts nearly 300 times more revenueper consumer minute. 16. Average Daily Time Spent 2013 Borrell Associates Inc. Yellow Pages 0.04(hours per day) Newspapers 0.18Radio 2.23Television 4.00 2013 Borrell Associates Inc. Sources: A.C. Nielsen, RAB, New York Times, Columbia Journalism Review 17. A Minute of Your Time is Worth 2013 Borrell Associates Inc. Yellow Pages$11.3 Newspapers$7.9Radio $0.3 Ad revenue per minute spent with each mediumall adultsTelevision$0.4 $0 $2$4 $6 $8$10 $12 In Millions 2013 Borrell Associates Inc.Sources: Borrell A.C. Nielsen, RAB, New York Times, Columbia Journalism Review 18. Local News: How Big a Draw? 19. Local news has a steady following 2013 Borrell Associates Inc.Enthusiasts Source: Pew Research Centers Internet &amp; American Life Project Local News Survey, January 2011. N = 2,251 20. Getting real about expectations 2013 Borrell Associates Inc. Three-fourths wont pay for local news online 23% would pay $5 to $10 per month Note: These are just those local news enthusiasts. Source: Pew Research Centers Internet &amp; American Life Project Local News Survey, January 2011. N = 2,251 21. Getting real about expectations If 72% are news enthusiasts. . . 2013 Borrell Associates Inc. and 23% of them would pay online fees . . . 16.5% of adults are the target. 22. Another QuestionSo. Is that non-local-news enthusiast a goodtarget?Probably not: Only 8% say theyd pay for news. 23. Conclusions The audience for local news is big and enthusiasticwww.borrellassociates.com But theyre most comfortable with traditional channelsWeb-based marketing seeks a buyer, not a reader Advertising-based news is more important on Web Therefore.Erecting paywalls on news articles is a pretty good idea. 24. Why?1. The vast majority of adults (87%) arent interested in local news online. Therefore: Theres no competitive pressure to make it free.2. Advertisers dont want to be around local news readers online. Therefore: Expecting riches from banner ads is a pipedream.3. Revenue per print subscriber is typically10 times that of a unique visitor.Therefore: Eroding print readership by putting news online is a bad idea. 25. Wrapping Up: A History LessonNewspaper publishers three generations ago would havethought this discussion ridiculous. Heres what a publishermight have said:Why are we spending so much time debating this? Of coursewe should charge! Im more interested in the bigger opportunityof this newfangled medium called the Internet. Lets invest heavilyin it. Lets own the local Internet space. 26. Publishers Used to Get ItThese TV call letters They started: 2013 Borrell Associates Inc.all relate to a localnewspapers name: Radio stations: 1920s WTMJ-TV Television Stations: 1950sKCRG-TV WSBT-TV Cable Systems: 1960s WBEN-TV KRON-TV WGN-TV 27. But the Computer Age Confused Them Videotext: 1980s 2013 Borrell Associates Inc. Audiotex/Fax-back services: 1990s Computer bulletin boards AOL/Prodigy: 1990s Internet/free Websites, no ads: late 1990s Rush to Monetize Websites: 2000-2004 Rush to charge for access: 2012 Unlike radio, TV and cable, publishers failed to see the interactive world as separate ventures. 28. The Lesson Most Havent Learned When a disruptor arrives, the disrupted Newspapers Interactive Media 2013 Borrell Associates Inc. often concentrates on the overlapping area, missing the biggerArea of Opportunity opportunities to create new business.Where many newspaperpublishers fail to see thesame opportunity theirpredecessors saw: Analtogether NEW entity.Where newspaper paywalls fit in. 29. Ask This QuestionIs the Internet a sustaining technology towww.borrellassociates.com your newspaper, or a disruptive technology?(Its both, of course. But erecting paywallsfits squarely in the sustaining camp.) Do you want a significant share of the onlineadvertising spent in your market?(Of course you do. But a significant share in one medium has NEVER, not ever, been attained without a singular staff focused exclusively on selling that medium.) 30. Recommendationswww.borrellassociates.com Charge for access to local news content! Pursue green area business with a separate staff That staff cant report to print managers. Period. Beware of applying mass media model to online 31. Thank You!Resources:@goborrell@borrellassoc Local Ad -Spending Data: www.adspending.com</p>